Turkish gov’t set to take measures to curb foreign currency debt risks of big companies: Deputy PM

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The Turkish government is set to announce a series of measures to curb risks which have resulted from high level of debts of big companies on foreign currencies, a top official has said.

Deputy Prime Minister Mehmet Şimşek told state-run Anadolu Agency on Jan. 28 that the measures for such debts of nearly 2,200 big companies would likely be completed in the first half of this year.

His announcement came after the government published a decree which put various restrictions on foreign exchange-based loans under the threshold of $15 million. The new decree, which aims to evade high foreign currency-based risks on the shoulders of nearly 26,000 small and medium-sized enterprises, will be put into force on May 2.

“This is now the time to evade such risks for 2,118 big companies which are indebted for $15 million or more in foreign currency basis. We will complete the respected regulation in the first half of this year,” Şimşek said, while also describing these steps as major structural reform.

The share of these large companies’ foreign currency-based debts is 84 percent in all Turkish businesses’ such debts, according to Şimşek.

“Our aim is to minimize fragilities in an effort to maintain a more sustainable economic growth,” he added.

For foreign currency denominated loans utilized from abroad, the SME borrower will need to have foreign exchange income to utilize foreign currency denominated loans from Turkey under a series of exceptions.

But this condition is not applicable for foreign currency denominated financial leasing transactions for the financing of certain machines and devices.

Foreign currency denominated loans to be extended by banks to Turkish residents in Turkey which do not exceed the amount of the receivables kept as foreign exchange in the Turkish branches of banks as collateral and/or the amount of issued securities by the centralized governments and central banks of the member countries of the Organization for Economic Cooperation and Development (OECD) or the amount of securities issued through their sureties will also qualify as an exemption thereunder.

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